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GREEN TO GOLD: HOW SMART COMPANIES USE

ENVIRONMENTAL STRATEGY TO INNOVATE, CREATE VALUE, AND BUILD COMPETITIVE

ADVANTAGE

Daniel C. Esty Hillhouse Professor of Environmental Law & Policy Yale University

National University of SingaporeMarch 2009

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WHAT IS THE STORY BEHIND THE STORY?

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THREE “REVOLUTIONS” IN ENVIRONMENTAL PROTECTION

• Public interest rising– Especially on climate change– Water and air pollution– Toxic exposures – food safety

• Change in corporate attitudes– core to strategy– upside opportunity

• Shift in regulatory approach– innovation as key to progress– private sector as engine of technology development– “command and control” → market mechanisms– Information Age environmental protection

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• Global economic crisis• New American president• Intertwined challenges of energy,

environment, security, and economy– climate change– trade liberalization

• Rising awareness of interdependence

SPECIAL POLITICAL MOMENT

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Book cover

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WHY IS ENVIRONMENT NOW A KEY ELEMENT OF BUSINESS STRATEGY

Natural world drivers

Green-oriented stakeholders

Evolving regulation

+++

Energy Prices

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ENERGY PRICES

• Oil prices double the level of three years ago

• New energy efficiency logic

• Conservation/use calculations of the past now must be redone

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EVOLVING REGULATION

• Carbon controls– EU “cap and trade” system– Changing U.S. political landscape– Emerging interest in China

• Food safety

• Chemical regulation (REACH)

• Waste and recycling rules

• Extended producer responsibility© YALE CENTER for ENVIRONMENTAL LAW & POLICY

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NATURAL WORLD DRIVERSClimate change Energy Water Quality & Quantity Biodiversity & Land Use Chemicals,Toxics,Metals

Air Pollution Waste Management Ozone Layer Depletion Oceans & Fisheries Deforestation

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10Source: Esty & Winston, Green to Gold (2006)

Regulators

NGOsBanks

MediaShareholders

Insurers

B2B Buyers

Competitors

Suppliers

Acquirers

“The Future” (Kids)

Communities

Consumers

Rule-makers & Watchdogs

Consumers &Community

Investors &Risk Assessors

CEO Peers

Employees Industry Assoc.

“Plaintiff’s Bar”

Company

Players in traditional economic and business analysis

Politicians

Business Partners

& Competitors

STAKEHOLDER ‘WHEEL’

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CHANGE CREATES OPPORTUNITY

Venture Capital invested in Cleantech in North America ($US m)

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$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2001 2002 2003 2004 2005 2006 2007 2008

Source: Cleantech Group (www.cleantech.com)

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MAINSTREAMING OF GREEN BUSINESS

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NEED TO BE STRATEGIC

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ELEMENTS OF AN ECO-ADVANTAGE STRATEGY

• Issue spotting– AUDIO analysis

• Stakeholder mapping– Stakeholder engagement evaluation matrix

• Eco-Advantage “plays”– Manage downsides – Develop upside opportunities

• Environmental management “best practices”

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BOTTOM LINE1. Environmental concerns are here to stay

2. Society’s approach to environmental protection is evolving:

- Information Age tools and opportunities

- move towards market mechanisms

- private sector as the engine of innovation

3. Corporate environmental strategy offers an opportunity for competitive advantage

4. It’s not easy being green© YALE CENTER for ENVIRONMENTAL LAW & POLICY

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www.yale.edu/envirocenter

www.yale.edu/cbey

www.EstyEP.com

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